German decision to loosen the debt brake opened the dams

The German plan frees the debt brake of the public finances and to enter into huge infrastructure and defense investments opened the dams in Europe.

Ursula von Der Leyen, Chairman of the EU Commission, has submitted a package of EUR 800 billion to re-arrange Europe.

An extraordinary EU summit of last week revealed a plan that the debt and deficit rules are flexible in defense expenditure, giving rise to more maneuver in the defense of EUR 650 billion.

The remaining EUR 150 billion will be raised with a new debt instrument, which allows the Commission to calculate bonds and raise money from the market, which can then be granted as loans to Member States.

In addition, private capital should be mobilized and focused on the European defense sector. For example, the aim is to change the rules of different funds to make it better to invest in weapons.

The amounts are already huge in Germany alone. The German historic “Whatver It Takes” moment is ending the decades -long season and, when realized, open an almost bottomless peak.

At first, EUR 200 billion has been talked about. At the same time, a $ 500 billion fund will be created for infrastructure investments.

In ten years, the total amount can reach EUR 1,000 billion. Hamburg Commercial Bank economists estimate the Financial Times that the German debt ratio can jump from 63 % to 84 % of GDP.

Loosening the debt brake helps Germany with the economy of the economy. The opening of investment fabrics can serve as a growth boom for the entire European economy.

In the state loan market, the first reaction was big. In the interest rate on a German ten -year government loan, the biggest day -to -day movement was seen as the breakdown of the Berlin Wall and the merger of Germany. Loan interest rates in other European countries also increased.

There is room for maneuver in the German economy, but in many other countries, debt degrees are already leaving for all time. For example, in Spain, the debt ratio is 104 %, in France 112 % and in Italy almost 140 percent of GDP. Even in Finland, the starting level is over 80 %.

Time will tell what kind of desire and ability in different EU countries have a defense investment.

High -bets would probably have an impact on inflation. The European Central Bank ECB, which had fallen to 2.5 % last week to 2.5 %, was waiting for further information on the decisions.

Something tells us that the ECB has previously a message that the interest rate is clearly down. Now the situation is no longer so clear. At the ECB Council meeting, uncertainty was described as enormous and phenomenal.

There are significant and fundamental changes in Europe and the world that may have major effects on the economy if speeches turn into action.